Sen. McCain is running a new ad on taxes featuring Gov. Palin. Here's the transcript of the ad:
GOVERNOR PALIN: How are you going to be better off if our opponent adds a massive taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. burden to the American economy?
ANNOUNCER: Good question.
GOVERNOR PALIN: The Democratic nominee for President supports plans to raise income taxes, and raise payroll taxes, and raise investment income taxes. How are you going to be better off if our opponent adds a massive tax burden to the American economy?
ANNOUNCER: The answer: we won’t.
Unfortunately, it's not that simple. You see Sen. Obama's tax plan raises taxes on some and cuts taxes for others. Many on the right call such a plan redistribution (and accuse some of those tax cuts as being spending in disguise). Obama labels his tax plan fairness and neighborly of the rich.
This ad implies that Obama's tax hikes on high income taxpayers would affect low-and-middle income households. This is of course true to some extent, but that adverse effect on those at the bottom is not likely to outweigh the added "transfer" income that those households would receive from Obama's direct taxA direct tax is levied on individuals and organizations and cannot be shifted to another payer. Often with a direct tax, such as the personal income tax, tax rates increase as the taxpayer’s ability to pay increases, resulting in what’s called a progressive tax. cut targeted at them (in a rather inefficient manner I might add) that is financed by the higher taxes on those at the top.
The fact of the matter is that in order to accurately criticize Obama's tax plan on distributional terms, the McCain campaign essentially needs to say that his tax plan is redistribution and is unfair. But that may not be an easy sell with many in the middle. So instead, McCain tells them that Obama's tax hikes on the rich are going to hurt them, when in reality, most of those in the middle are still going to be better off from Obama's tax plan (assuming they don't care about the moral dimensions of redistribution).
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